But this year’s jump in defaults, mainly by state-run firms—which account for around 70% of the corporate-bond market—has shaken investors’ long-held assumption that if such companies had trouble paying back creditors, the government would have their backs.

Already, the premium investors are willing to pay for the highest-rated Chinese company bonds over the debt of riskier companies rated at single-A has widened to an all-time high, based on their yields.

Corporate issuers have canceled 72 planned new issues this year, and a further 16 have been delayed, according to Shanghai data provider Wind Information.